This is the Korean telecom service provider's first profit increase in five quarters as it struggles to find new sources of growth with voice traffic dwindling.

?There have been concerns about sustainable growth in the mobile telecom industry, but we are paving the way for solid growth by retaining premium subscribers and launching various services that meet customer needs,? Kim Shin-bae, SKT's chief executive, said in a statement.

The company posted Won467bn ($456m) of net profit in the April-June period, compared with Won299bn a year ago. Sales rose 6 per cent to Won2,527bn.

Reduced marketing costs boosted SKT's bottom line. Marketing costs dropped 23 per cent to Won442bn as the company, which controls half of the country's $17bn mobile market, gave up on increasing market share until the end of 2007.

Wireless internet services emerged as a main driver of SKT's revenue growth, accounting for 26 per cent of total sales. Revenue from the new services jumped 43 per cent from a year ago to Won597bn, as it increased investment in 3G networks and content development.

Analysts expect wireless internet services to continue to drive SKT's growth this year. South Korea is one of the world's most advanced wireless markets, with data services such as email and downloadable video and music clips widely used.

?SKT is going in the right direction. It is increasing investment in data services as voice traffic continues falling,? said Yang Jong-in, an analyst at Korea Investment & Securities.

The company plans to spend about Won600bn, or 38 per cent of its 2005 capital expenditure, on building 3G networks through which customers can download online games, music and movies on mobile phones. SKT has been given a licence to operate the next-generation wireless broadband services, called Wibro, from 2006.

Mr Kim told investors that SKT expected to meet its earlier earnings targets for the full year, if market conditions remained stable in the second half. SKT has said revenue will increase 3 per cent to Won10,000bn this year.

As the domestic market becomes saturated, the company is turning its attention to overseas markets such as India.